Transcript Chapter 1 - McGraw Hill Higher Education - McGraw

Chapter 9
Reporting
Processes and
eXtensible
Business Reporting
Language (XBRL)
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Learning Objectives
• LO#1 Explain how data warehouses are created and used
• LO#2 Describe the basic components of business intelligence
and how they are utilized in a firm
• LO#3 Describe how digital dashboards allow for continuous
tracking of key metrics
• LO#4 Explain how XBRL works and how it makes business
reporting more efficient
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LO# 1
Data Warehouses
• A data warehouse is a collection of information
gathered from an assortment of external and
operational (i.e, internal) databases to facilitate
reporting for decision making and business
analysis.
• Data warehouses often serve as the main
repository of the firm's historical data, or in other
words, its corporate memory and will often serve
as an archive of past firm performance.
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LO# 1
Data Warehouses
• Data warehouses are kept separate from the operational database.
– Information in the warehouse can be stored safely for extended
periods of time and data warehouses can run data queries without
slowing down the performance of the company’s operational systems.
• Data warehouses do work together with operational systems to provide
necessary insight, particularly in the case of customer relationship
management (CRM) and supply chain management (SCM) systems.
– What are customers buying? What did they buy in a recession? What did they buy after
a natural disasters? What do they buy as their income goes up?
• Data warehouses are often designed to facilitate decision making such as
those often used in managerial accounting.
– Output might include variance reports, trend reports, variance analysis
reports, and reports that show actual performance are compared to
budgeted information.
9-4
LO# 1
Model of Data Warehouse Design
9-5
LO# 2
Business Intelligence
• Business Intelligence is a computer-based
technique for accumulating and analyzing data
from databases and data warehouses to
support managerial decision making.
• One way that firms may gather business
intelligence is by use of a web crawler, which
systematically browses the World Wide Web
in a systematic way, collecting information.
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LO# 2
Process of Business Intelligence
• Gather information (either internal
information, external information or both)
from a variety of sources.
• Analyze the data to discern patterns and
trends from that information to gain
understanding and meaning.
• Make decisions, hopefully better informed
ones, based on the information gained.
9-7
LO# 2
Examples of Business Intelligence
• How would American Airlines (hub in Dallas) and
US Airways (hub in Phoenix) use business
intelligence to track its competitor’s prices over
different times, days of the week, etc.?
• How would Merrill Lynch use business
intelligence to price an initial public offering of
stock for a firm in the Internet retail industry?
– They may use business intelligence to assess current
economic and stock market conditions, assess how other
Internet retail firms are performing in the stock market
and assess how initial public offerings have recently
performed.
9-8
LO# 2
Data Mining
• Data mining is one technique used to analyze
data for business intelligence purposes. Data
mining is a process using sophisticated
statistical techniques to extract and analyze
data from large databases to discern patterns
and trends that were not previously known.
– Data mining is often used to find patterns in stock
prices to assist technical financial stock market
analysts, or in commodities or currency trading.
9-9
LO# 2
Data Mining
• Data mining will only find statistical relationships
and some of them represent spurious
correlations. Data mining must be coupled with
common sense to interpret the statistical
relationships found.
– There is a classic example that ice cream sales are
correlated with drownings suggesting that as ice cream
sales increase, the number of drownings also increase.
That does not mean that ice cream sales cause drownings
or that drownings cause more ice cream sales, but rather
that warm weather caused (or had an effect on) both.
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LO# 3
Digital Dashboards
• A digital dashboard is designed to track the
firm process or performance indicators or
metrics to monitor critical performance.
– Orders month to date, days that receivables are
outstanding, budget variances, and days without an
accident on the assembly line, etc. are all examples of
what might be tracked continuously.
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LO# 3
Example of Digital Dashboard at GE
9-12
LO# 4
FINANCIAL REPORTING AND XBRL
• XBRL stands for eXtensible Business Reporting Language
and is based on the XML language, a standard for Internet
communication between businesses.
• The XBRL database is available for various uses, including
reporting on the firm’s web site, filing to regulators (SEC,
IRS, etc.) and providing information to other interested
parties such as financial analysts, loan officers and
investors.
• Each interested XBRL user can either access standard
reports (i.e. 10-K going to the SEC or the corporate tax
return going to the IRS) or specialized reports (i.e. accessing
only specific data for a financial analyst, etc.).
9-13
LO# 4
Financial Reporting Using XBRL
9-14
LO# 4
XBRL Terminology
• The XBRL taxonomy defines and describes
each key data element (e.g., total assets,
accounts, payable, net income, etc.).
• XBRL instance documents contain the actual
dollar amounts or the details of each of the
elements within the firm’s XBRL database.
• XBRL style sheets take the instance
documents and add presentation elements to
make them readable by humans.
9-15
Should XBRL be audited?
What assurances do we need on XBRL?
LO# 4
• We believe XBRL Assurance should include the
following assurances that:
– The most current, standardized XBRL taxonomy is
used,
– The underlying financial and nonfinancial data that is
used in XBRL tagging is reliable,
– The XBRL tagging is accurate and complete, and,
– The reports generated using XBRL are complete and
received on a timely basis.
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LO# 4
XBRL GL
• XBRL GL is also known as XBRL Global
Ledger Taxonomy
• XBRL GL allows the representation of anything
that is found in a chart of accounts, journal
entries or historical transactions, financial and
non-financial.
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LO# 4
How XBRL Works
9-18
LO# 4
XBRL Summary
• XBRL serves as a means to electronically
communicate business information to
facilitate business reporting of financial and
nonfinancial data to users.
• XBRL greatly enhances the speed and
accuracy of business reporting.
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LO# 4
Summary
• Data warehouses serve as a repository of information that is
separate from the operating databases of the firm to support
decision making across a number of functions in the firm.
– Data marts represent a slice of data from the data warehouse to meet a
specific need.
• Business intelligence uses computer-based techniques to
accumulate and analyze data that might be helpful to the firm’s
strategic initiatives.
• Digital dashboards tracks critical firm performance in a way that is
easily accessible to executives.
• XBRL serves as a means to electronically communicate business
information and facilitate business reporting of financial and
nonfinancial data to users.
9-20